Metamora, Michigan, USA. Thanks for stopping by!
So, we rise from the rubble...
Wednesday, May 8, 2024
Dan, I Allegedly, "This Will Kill Real Estate"
Full screen recommended.
Dan, I Allegedly, 5/8/24
"This Will Kill Real Estate"
"Fannie Mae and Freddie Mac have just released a guideline for insurance companies. They must replace to the current market value anything that’s damaged on a home. This will be impossible and it will destroy real estate."
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"A Race of Morons"
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"A Race of Morons"
Oblivious to the rising tide of debt, deficits and defaults,
mankind stumbles toward disaster..
by Bill Bonner
"A man who takes what is’n his’n.
Gives it back or goes to pris’n."
~ Daniel Drew
"We have an old friend. One of the smartest men we’ve ever met. But he’s very down on his luck. His businesses failed. His marriages failed. His investments failed. And now, his health is failing too. “How did it come to this,” he wonders. “How could I be such a moron?” Today, we wonder for the whole nation.
This in from Business Insider: "US households are on the brink with excess savings likely to be depleted by month-end, San Francisco Fed says Savings built up by American households during the pandemic are all but gone, the San Francisco Fed says. US household savings have fallen from a record $2.1 trillion in 2021 to around $190 billion as of June, per their data. It may indicate a wider squeeze for Americans – who must contend with the highest interest rates in 22 years."
Dot… to Dot… to Dot… And then, this little item came in from Fortune: "Nearly two-thirds of Americans are living paycheck to paycheck, study finds. Research from LendingClub finds that 61% of adults were living paycheck to paycheck as of July 2023, a two-point increase from the previous year. That comes even as inflation rates have dropped from 9.1% last July to 3.2% this year. The breakdown of people living paycheck to paycheck was fairly evenly spread. Low-income consumers - those earning less than $50,000 annually - saw the biggest increases, rising from 74% in July 2022 to 78% in July 2023.
What happened? How did it come to this? Is this just the nature of things…that the middle classes are always “on the brink” of ruin? Or is it a feature of public policies? Here’s another dot to connect: "The Fed's balance sheet reductions have hit $1 trillion… Where once the Fed's portfolio held around $8.4 trillion in assets, the institution's System Open Market Account now shows that this has fallen to just under $7.4 trillion. These balance sheet reduction efforts are more commonly known as quantitative tightening, and are a strategy deployed by the central bank to drain excess liquidity from markets."
Giveth…and Taketh: The Fed giveth and the people are happy. The Fed taketh away and the people hurteth. But what is it that it gives and takes? The Fed does not print ‘money.’ And when it ‘reduces its balance sheet,’ it does not take back the money it didn’t give out in the first place. Money is a stand-in, like a claim ticket from a parking garage. It represents real wealth. The Fed has no pink Cadillac…no black Mariah…no silver Ford F-150. It comes onto the lot with nothing. And then, it prints up a claim ticket, giving the holder the right to take any car on the lot.
How could anyone ever think that was going to work out? The Fed offers credit, not money. Money is a claim on real wealth, already in existence. Credit is all “on the come.” It claims wealth that may or may not come into being…and draws on it in the present. The poor borrower drives off in a newish Mercedes. But it is not his car. And sooner or later, he’ll have to return it.
This is not just a theoretical matter. A man who spends all his savings is broke. Busted. He has nothing. Too bad. So sad. But the man who borrows…spends…and can’t pay back is not only a disappointment to himself, but like a soldier who loses his nerve on the battlefield, he’s a danger to the whole army.
Debtors have creditors. The creditors have creditors of their own…and bills to be paid…and holidays planned months in advance…and, if they are banks, federal regulators who will shut them down if their accounts are out of order. Apparently, US households are down to their last dime. And here comes the Repo Man. The Washington Post: "More Americans are falling behind on their car loan and credit card payments than at any time in more than a decade, a troubling signal of consumer stress as higher prices and rising borrowing costs are squeezing household budgets.
Self-Inflicted Wounds: How could that be? As we've seen, the typical working man (and woman) is actually making less per hour than he did in 1966. Basic commodities are cheaper (in terms of hours of work needed to buy them). But finished products – those that he actually buys…those that should benefit from more technology – are much more expensive. And GDP growth rates have come down…decade after decade…from the ‘60s. We used to expect growth rates of 3% to 5%. In 1966, US GDP rose more than 6%. In 1984, it went up by more than 7%. Now, we’re lucky if we get 2%. For the last 10 years, GDP growth has averaged only about 1.5%.
The numbers are always a little slimy and slippery. But for the purpose of today’s cogitation, let us imagine that we are right: 90% of the population has gotten poorer, not richer, over the last half a century. They owe $12 trillion on their houses. Another trillion on their credit cards. And now, it’s time to return the Mercedes. And let us wonder: what kind of morons would do such a thing?"
"Do You Believe..."
“Do you believe,’ said Candide, ‘that men have always massacred each other as they do today, that they have always been liars, cheats, traitors, ingrates, brigands, idiots, thieves, scoundrels, gluttons, drunkards, misers, envious, ambitious, bloody-minded, calumniators, debauchees, fanatics, hypocrites, and fools?”
“Do you believe,” said Martin, “that hawks have always eaten pigeons when they have found them?”
- Voltaire
"Mankind's Favorite Pastime..."
Full screen recommended.
Steve Cutts, "A Brief Disagreement"
"A visual journey into mankind's
favorite pastime throughout the ages."
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"War"
"War is an intense armed conflict between states, governments, societies, or paramilitary groups such as mercenaries, insurgents, and militias. It is generally characterized by extreme violence, destruction, and mortality, using regular or irregular military forces. Warfare refers to the common activities and characteristics of types of war, or of wars in general. Total war is warfare that is not restricted to purely legitimate military targets, and can result in massive civilian or other non-combatant suffering and casualties. While some war studies scholars consider war a universal and ancestral aspect of human nature, others argue it is a result of specific socio-cultural, economic, or ecological circumstances.
The earliest evidence of prehistoric warfare is a Mesolithic cemetery in Jebel Sahaba, which has been determined to be about 13,400 years old. About forty-five percent of the skeletons there displayed signs of violent death, specifically traumatic bone lesions.
Since the rise of the state some 5,000 years ago, military activity has occurred over much of the globe. Estimates for total deaths due to war vary wildly. For the period 3000 BCE until 1991, estimates range from 145 million to 2 billion. In one estimate, primitive warfare prior to 3000 BCE has been thought to have claimed 400 million victims based on the assumption that it accounted for the 15.1% of all deaths. For comparison, an estimated 1,680,000,000 people died from infectious diseases in the 20th century."
"Revenge of the NEET"
"Revenge of the NEET"
by John Wilder
"NEET is Internet slang for “Not in Employment, Education, or Training” – in other words, “stays at home and smokes weed and plays video games.” Mike Rowe, the Dirty Jobs guy, spent time noting last year that even with unemployment below 4%, 7 million men between the ages of 25 and 54 aren’t in the work force at all. Now, I would hate to bring up the points that if our nation:
• sends all the factory jobs overseas,
• imports millions of foreigners with H1B visas (95,000 a year, minimum, since 2006, and more going back before that), or
• just like Google®, cut hundreds of highly-skilled technical jobs in the United States and offshore them to Mexico and India,
then maybe, just maybe, the job market actually sucks because the wages are depressed to the point where living conditions at those wage levels are literally third world.
Why would people put up with that? The market. An example I read recently was of a person from India claiming that the only way they could find a place to live (this was in Canada) was in a bed in a kitchen in a two-bedroom apartment where six other Indian families were living. Admittedly, this is probably an upgrade from living in a slum in Mumbai, but these six families each pay a sixth of the rent. If a typical Canadian family wanted to rent that apartment and each Indian family was making $300 payments, the Canadians would have to cough up $1800. That’s why people are tenting it – tents are better (marginally) to the American psyche than living with six other families in a condition where “squalor” would be an upgrade.
Another example? When I was a kid, delivery work was for kids. Sixteen-year-olds were the ones frying Big Macs® and driving pizza from the Pizza Den to people’s houses. Now? Doordash® is now an adult job and everyone I see running the windows of the fast-food places has been voting for a big chunk of this century.
The United States is slipping quickly (and then, I fear, all at once) into a third world economy. To be clear, I’m not blaming those attempting to get to a better place, but it would be magical thinking to believe that once they got here and were a majority that they’d not immediately turn the United States into just another version of their homeland. You know, the one they fled.
But some of them aren’t working at all. And of those men that aren’t working, a huge number of them are white guys. It turns out that all, and I mean all, of the job growth since Corona™ became something other than a beer, went to dudes that weren’t white. In fact, the number of white people in the workforce dropped while Joe Biden “created” all of these jobs.
They were replaced. On any job where there is a remotely credible alternative with some sort of “diversity” score based on: a sexual fetish, being “female”, missing one of their six spleens, race, ethnicity, or religion. Of course, white, Christian and male is the opposite of diverse even though that category is only 6% or less of all of the humans we know of in the Solar System, excluding Phobos.
With things like Diversity, Equity, and Inclusion (DEI) actively putting up barriers to hiring (or keeping) white guys, I’m not surprised that many have just given up. They are pretending right now that that DEI is going away, but in reality, they’re keeping it but just naming it other things. “People and the Planet,” anyone? (Yes, it’s real.) Their goals really haven’t changed.
The big problem is that Identity is now more important than Competency. Think: Chernobyl 2.0, brought to you by DEI. Why no DEI in the NFL®? People actually care about meritocracy in football players, I guess. Also, Automation is real. Factories of almost any type, when compared by their counterparts of 1960, are much more highly automated. A guy named Fred walking around to check temperatures on thermometers to make sure the boiler doesn’t suddenly wipe Peoria off the map has been replaced with sensors that feed pressure, temperature, and flowrates back to computers that automate the process. Fred’s out of a job, and, if those boiler automation systems weren’t programmed in India (looking at you, Boeing®) then Peoria is still safe. Except for Fred, who doesn’t have that job anymore. A.I. is coming for lots and lots of other jobs. Starting now. According to Indeed®:
• Software development jobs are down 51.3%,
• Information Design down 44.3%• IT Operations and Helpdesk down 33.5%
• Industrial Engineering down 30.3%
Are all of these jobs replaceable by A.I.? Of course not. But 35.3% of HR jobs (same study) apparently are.
I’m not a NEET, but I’m sure it’s easier being a NEET without a family. No particular requirement to have shelter other than couch surfing, and some NEETs work for a couple of months during the year and then goof off, smoke weed, and play video games during the rest of the time.
Families have always been the nucleus that keeps men showered and shaved, but without them, men give up. It’s not like they can afford a family, either. Housing prices and interest rates are now high enough in most metro locations that most young families are effectively locked out of homeownership. The price to income ratio has doubled since 1985 nationally – homes are now twice as expensive as 1985 compared to median family incomes. Add in 7%+ interest rates, and you’ll see why the middle class has caused Red Lobster to go bankrupt.
In reality, there’s not a labor shortage – there’s only a labor shortage at the wages companies are willing to pay, and a ludicrous inflation of the value of women so that what they bring to the table (for kids) doesn’t equal what they have to put. NEETs don’t really care about either. They’ve got their weed, couches, and video games."
Bill Bonner, "How the Fed Came to Love Inflation"
"How the Fed Came to Love Inflation"
The US economy doesn’t need cheaper credit. Just the opposite;
it could use higher interest rates to lower inflation.
As it is, consumer prices are still going up at about two times the Fed’s target.
by Bill Bonner
"The principle of spending money to be paid by posterity, under
the name of funding, is but swindling futurity on a large scale."
- Thomas Jefferson
Dublin, Ireland - "We left off yesterday with the provocative idea that the Fed doesn’t really want to stifle inflation. It wants more inflation... enough to lower the real value of US debt. Today, we examine the swindle behind it.
At 5% inflation, other things remaining the same, the US would cut the real value of its government debt by $1.7 trillion in a single year. Trouble is, other things don’t remain equal. At current levels of deficits, the US adds $1.7 trillion in new debt per year. Tough situation. The feds need either more inflation... or less spending. Our longstanding prediction: they will choose inflation.
On the surface, the Fed is four-square, dead-set against inflation. It will swear upon a Trump Bible that it intends to get the CPI down to 2%, and that it will look neither to the right nor to the left until the job is done.
More to the Story: But there’s always more to the story. Who wins? Who loses? Who decides? There’s the superficial, political analysis... and there are the deeper currents of history, the Megapolitical analysis. In public, the Fed fights inflation; in private, it encourages it.
The media report that two things are pulling the Fed in different directions. Some recent inflation news, for example, is ‘negative.’ That is, it tells us that the economy is weakening and could use a dose of EZ money. The job market is weakening. New jobs posted in April were fewer than expected. Total employment rose... but at the lowest rate in three years. Unemployment went up. Job openings went down.
A better measure of the job market is the actual number of hours worked; the last reading of that measure was negative, indicating a weaker economy. And manufacturing (according to the Purchasing Managers’ Index) signaled recession. But what ho! Among the surface chop there was some ‘positive’ (inflationary) news, too.
The Case-Shiller measure of house prices went up to another all-time high in February. Labor costs (including wages and benefits) rose more than expected. Prices at the wholesale level rose to their highest level in 2 years. (A sign of higher inflation to come?) And the decline in the US money supply seems to be bottoming out.
False Conclusion - All of these things suggest that the US economy doesn’t need cheaper credit. Just the opposite; it could use higher interest rates to lower inflation. As it is, consumer prices are still going up at about two times the Fed’s target. Economists argue about which of these data points is most important... and whether the balance of opinion leans towards rate cuts... or a rate hike.
The typical observer might draw a completely false conclusion: that the Fed has the power to tip the scales in whatever direction it wants. He might think that the Fed can always control interest rates... and with wisdom that surpasseth understanding can guide the economy along the path to prosperity and growth forever, neatly inflating with cheap money when needed and cutting off the stimulus when growth and inflation threaten to get out of hand. But that’s not the way it works. Beneath this newsy blather is a much different story - one with a beginning and an end... and a moral.
The genesis came in 1971, with the introduction of a new dollar that the deciders could diddle. Over time, the Fed’s easy money - especially during the 2009-2021 ‘zero interest rate’ phase - led people to borrow far more than they otherwise would. Today, total US debt - household, business and government - approaches $100 trillion, nearly 4 times US GDP.
You can see the problem. The higher the debt, the more of your current earnings you must use to pay the interest. At a uniform 5% interest, for example, America would need to use almost 20% of its GDP just to pay interest... while swindling the next generation by leaving the principal amount unpaid. The lead borrower was, of course, the US government itself.
On the flip side of borrowing is repaying. Mathematically, the US could pay down its debt. It would require abandoning its global empire, however. And trimming domestic social welfare programs too. Politically, it is impossible to make those changes; like an alcoholic, the country will have to ‘hit bottom’ first.
That leaves inflation as the only real option. The feds know that. They need to get the inflation rate up, not down, so that the real value of the government’s debt goes down to a more manageable level. That’s why, even with inflation at twice the Fed’s target, Powell is still insisting that the next move will be to lower rates, not raise them. The public may not want higher prices. But the people who matter do – Big Money, Big Business, and Big Government. Stay tuned."
Gregory Mannarino, "Alert! Expect Mass Currency Devaluation"
Your guide...
Gregory Mannarino, AM 5/8/24
"Alert! Expect Mass Currency Devaluation"
Comments here:
Adventures With Danno, "Massive Price Increases At Sam's Club!"
Full screen recommended.
Adventures With Danno, AM 5/8/24
"Massive Price Increases At Sam's Club!"
"In today's vlog, we are at Sam's Club and are noticing massive price increases! We are here to check out skyrocketing prices and a lot of empty shelves! It's getting rough out here as stores seem to be struggling with getting products!"
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Tuesday, May 7, 2024
Musical Interlude: Marmalade, "Reflections of My Life"
Marmalade, "Reflections of My Life"
"The world is a bad place,
A bad place,
A terrible place to live,
Oh, but I don't want to die..."
"Israel is Finished with Netanyahu, Tens of Thousands Demand He Resign Now"
Full screen recommended.
Redacted, 5/6/24
"Israel is Finished with Netanyahu,
Tens of Thousands Demand He Resign Now"
"Why are western media companies ignoring the tens of thousands of Israelis protesting Netanyahu and demanding his resignation? This comes as Israel bombards Rafah killing scores of civilians."
Comments here:
Jeremiah Babe, "Tesla Worker Laid Off Living Out Of His Car; Everything Is Out Of Control; People Are Trapped"
Jeremiah Babe, 5/6/24
"Tesla Worker Laid Off Living Out Of His Car;
Everything Is Out Of Control; People Are Trapped"
Things are completely out of control debt, social unrest, war, crime
and job losses. Prepare for more chaos as America loses more control.
Comments here:
Canadian Prepper, "Emergency Code Red: Belarus Loads Nukes On Planes!"
Canadian Prepper, 5/6/24
"Emergency Code Red: Belarus Loads Nukes On Planes!
US Ambassador Leaves Russia; Pentagon Lies!"
Comments here:
“Parasitic Derivatives: $1.5 – 2.5 Quadrillion Dollars, Too Big to Understand”
“Parasitic Derivatives: $1.5 – 2.5 Quadrillion Dollars,
Too Big to Understand”
by David Hague
“I recently returned from two weeks of ‘high level’ meetings with a group of Bankers [this is code for two weeks of subsidized debauchery with bankers] in Rome. As I sat at my desk, I was hoping to motivate myself to pursue a more chaste and pure existence. Unfortunately the Polar Vortex experienced by North America drained me of my good intentions. The bone chilling cold once again had me reaching for my trusty bottle of Jack Daniels for warmth and inspiration. My time in Rome had not been completely ‘wasted’, so to speak. I had secured a contract from the European Central Bank [ECB] to research the topic of Derivatives. I was to present my findings at the upcoming World Economic Forum in Davos later that month.
One Quadrillion Dollars: Too Big to Understand: Dear Reader, please resist your natural instinct to click away from this commentary at the mere mention of the word ‘Derivatives’. I am acutely aware of the boredom and befuddlement that this word instills in you. At this point I would simply remind you that the derivatives market is estimated to exceed one quadrillion dollars. [This incredibly large number is actually an accurate estimate of the size of the derivatives marketplace]. (In addition, unfunded liabilities, like medical care and pensions, are at least $300 trillion globally. If we add gross derivatives of $1.5 quadrillion, which are likely to turn into real debt as counterparties fail, the total debt and liabilities are above $2 quadrillion. Source - CP) Despite the fact the derivatives market eclipses the market capitalization of the NYSE by an exponential factor, it is not discussed, reported or tracked because it is simply too complicated and opaque. Warren Buffet’s, comment about ‘weapons of mass financial destruction’ seem to be the beginning and end of any discussion on the topic.
Derivatives are a parasitic financial instrument: For those of you who are unschooled on the topic of derivatives, allow me to explain. Derivatives are abstract financial instruments, which, like parasites, can attach themselves to all manner of stocks, bonds, mortgages, commodity, debt obligations, currency exchange, interest rate fluctuations… in short, anything. Derivatives exist in the ‘twilight zone’ of the banking industry. Like black holes, their presence and massive influence are acknowledged yet the true influence on the global economy of this quadrillion dollar ‘event horizon’ is only theoretical. The near catastrophic disasters at Barings, JP Morgan and AIG are small examples of their destructive powers. However I will offer you Investorpedia’s more clinical definition. “A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties.”
You got to know when to hold ‘em, know when to fold ‘em, {Kenny Rogers}: One might think of derivatives as a random game of online poker: you don’t know who your opponents are [your counterparty], you do not know if you will be paid [counterparty risk], you do not know if the game is legitimate, [lack of regulation], and your opponents are probably able to see what cards you are holding, [market domination by large banks]. As well, you are making bets that in many instances neither you nor your opponents fully grasp [complexity of the market]. With each wager you are potentially risking not only your current assets, but your future assets as well. [Leverage]. In some cases you do not know how much you are betting. Imagine as well, that you play this game every day with trillions of dollars that you do not have. This is the global derivatives market.
It is all Greek to me: Alternately, as derivatives are often created as a form of insurance, think of them as an insurance policy in which you:
• Do not know the name, address or any contact information relating to your insurer.
• Do not know if your insurer has the resources to pay a claim.
• Do not understand the insurance contract as it is written in Greek.
• Must rely on a shadowy third party [ISDA] to decide what constitutes a claim. [Credit event]
• Do not know whether your insurer is itself vulnerable to the particular risk you have contracted with it to insure.
His moral lassitude allowed him to excel: Dear Reader, I digress, let me return to my narrative. The aforementioned lucrative contract was secured by two key factors. The first factor was my friendship with Gustavo Laframboise-Pierre, the European Central Bank’s [ECB] Global Director of Statistical Creation. My relationship with such an esteemed member of the ECB traced its roots back to Gustavo’s days as a bookie for Wall Street’s elite. I referred so much business to him we became very good friends. His station in life took a remarkable turn when a senior member of the ECB, while in New York on a ‘fact finding mission’ [this is code for visiting his favorite escort] made an outrageously large and incorrect wager on the outcome of the 2010 World Cup. (Perhaps unsurprisingly, the term ‘derivative’ is commonly used in sports betting!) The only way the debt could be settled was for the banker to offer Gustavo a highly paid sinecure at the ECB. Gustavo became the Global Director of Statistical Creation with the responsibility of making up statistics to support whatever fantastical and deranged policies Central Banks around the world were initiating. Remarkably Gustavo’s aptitude for numbers, coupled with his moral lassitude allowed him to excel at his job. It was Gustavo who invented the term ‘Quantitative Easing’ as a benign euphemism for runaway money printing.
Where ignorance is bliss, ‘tis folly to be wise’: The second factor that secured the contract for me was a chance remark I made as Gustavo and I enjoyed a ‘working lunch’, with several senior executives who represented many of the world’s largest banks. The working lunch was held at Rome’s exclusive Blue Moon Gentleman’s Club. As the featured dancer left the stage I happened to mention to the assorted luminaries that I had read an article on the subject of derivatives. The bankers looked at me with something akin to awe and reverence. Gustavo whispered to me that the topic of derivatives had been discussed in a recent conference call by the world’s bankers. The conclusion reached at that time was that derivatives were too boring and too complicated for bankers to grasp. Despite JP Morgan’s very public, expensive and monumentally stupid 5 billon dollar derivatives trading loss bankers still choose to remain cocooned in a ‘Cloak of Ignorance’ as it relates to derivatives. Thomas Gray’s lament that ‘where ignorance is bliss, ’tis folly to be wise’ could easily be the mission statement of the global banking industry.
I had read a complete article, I was a ‘de facto expert’: Dear reader, I am not being rude and offensive in my remarks about JP Morgan. Surely you would agree with me that any large bank that loses $5 billion in derivatives trading is ignorant of the properties and risks of derivatives? The fact that I had actually read a complete article on the subject made me a de facto expert on the topic. Gustavo, in an act of kindness, seized the opportunity on my behalf and pressed his colleagues to retain me to research the topic and make a presentation at the upcoming World Economic Forum in Davos. Thus I found myself preparing to dazzle the world’s financial elite with my insights into the risks and opportunities presented by the global derivatives market. In a rush to complete the deal before the next dancer took the stage it was agreed that I would receive the standard banker’s honorarium of $5,000/hour up to a maximum of ‘whatever it takes’.
At $5,000/hr., you would surely not expect me to be brief: I sat at my desk, sipping ‘Gentleman Jack‘ while I looked out at the bleak weather that made Brooklyn so depressing in the winter. My TV was tuned to CNBC, as I waited for Wall Street to open. I put my crack pipe in its case. Dear reader like many of you [especially those of you who work in the banking industry], I have learned all too well, the dangers of mixing crack cocaine with whiskey on an empty stomach. [Have we not all indulged, to our regret, that particular venial sin at least once?] I collected my thoughts and began to write my lengthy tome on the derivatives market. Dear reader at $5,000/hr., you would surely not expect me to be brief.
Lions and Tigers and Bears [and derivatives] Oh My!: I do not want to frighten you. However I will share with you some facts about derivatives that will have you reacting as nervously as Dorothy did in the Wizard of OZ when confronted with the thought of Lions and Tigers and Bears. ‘Derivatives, Oh My’, will I suspect be the words that escape your lips.
• Size of the derivatives market: 1.5 – 2.4 QUADRILLION dollars
• Size of Global Stock and bond markets: 175 trillion dollars
• Who regulates the Derivatives market? LOL, Regulation is a ‘work in progress’ dominated by the big banks.
How dangerous are derivatives? They almost destroyed the world’s largest insurance company, AIG, as well as the global economy. Seriously, you don’t remember? Just Google the words AIG and collapse. Alternately you might call Jamie Dimon at JP Morgan and ask him if Derivatives are dangerous. Have recent regulatory changes made the world economy less likely to implode from a derivative fuelled explosion? Actually as one might expect, thanks to regulatory enhancements that had to run the gauntlet of bank lobbyists prior to their approval, the world’s economy is in more danger than ever from a derivatives inspired meltdown.
‘Duck Dynasty’ and ‘Real Housewives’ to the rescue: How much attention does the Main Street pay to the world’s largest and riskiest casino? [AKA: the Derivatives market]. If one were to Google the word derivatives, one will get 34 million ‘hits’. Alternately, if one does a similar search for the words stocks bonds and markets one will get 400 million ‘hits’. The 34 million ‘hits’ generated by a Google search of the word derivatives compares unfavorably with the 37 million ‘hits’ generated by a search of the term ‘Real Housewives of Atlanta’, the 209 million ‘hits’ generated by a search of the term ‘Duck Dynasty’ or the 713 million ‘hits’ generated by searching the word ‘Sex’. One must conclude that only when derivatives are discussed by one of the ‘Real Housewives of Atlanta’ posing nude in bed with one of the cast members of ‘Duck Dynasty’ will derivatives receive the attention they deserve.
Reality bites: Derivatives can only be discussed as ‘Fake News’: Where can one find insights and coverage of the Derivatives Market in the mainstream media? Is Fox News or CNN my best choice? Sadly Dear reader your best choice would have been The Daily Show with Jon Stewart. Despite the calamitous risk and obvious importance of this topic only Mr. Stewart and his team dared to share information with the general public. Given the outlandish and frightening risks derivatives constitute to the Global Economy, perhaps Mr. Stewart was correct that it can only be discussed in the ‘Fake News’ format.
Derivatives: better suited for Ripley’s Believe it or not than the Wall Street Journal: How bizarre is the derivatives market? How is the concept of money for nothing propagated by the derivatives market? What is the difference between a chump and a champion in the derivatives market? I will leave it to Shah Gilani in his excellent post in “Wall Street: Insights and Indictments“ to explain. Suffice to say that one is able to buy insurance in the derivatives market. One can then cause the insured event to occur by collaborating with a third party. All that remains is to collect the insurance proceeds. [To be clear the proceeds are usually in the tens of millions of dollars.] The derivatives market makes the Ponzi-like money printing of the Central banks look like ‘Amateur Hour’.
Who needs ‘Crack’? Dear reader, usually I needed a little help from my friend Mr. Crack to feel as paranoid and euphoric as I did at this moment. Paranoid, because it was clear to me that the derivatives market was truly a weapon of mass financial destruction. Euphoric because I knew that my research would make my ‘Derivatives’ presentation at the World Economic Forum a groundbreaking ‘tour de force’ that would vault me to the forefront of ‘talking heads’ that pass for experts on mainstream media. Fame, fortune, a book deal and perhaps that elusive Nobel Prize would surely follow. My twenty minutes of painstaking research, had made me one of the world’s foremost experts on this complex subject. [BTW Dear Reader by reaching this point in my commentary, you surely now know more about derivatives than most bankers and traders on Wall Street. You should be quite pleased.]
David, you are an imbecile: I decided to reach out to my pal Gustavo and share some of my findings. I knew that it was 3:30 in the afternoon in Paris so I would be able to catch Gustavo just as he arrived for another day of work. “Gustavo”, I intoned, breathless with excitement. “I have uncovered some startling, controversial, and frightening information about derivatives. The luminaries and leading lights who attend my presentation in Davos will be utterly gobsmacked by my revelations. The media will undoubtedly ensure that my findings go viral. The topic of derivatives will no longer exist only in the dark shadows of the banking industry. The danger that derivatives pose to the global economy will permeate the consciousness of Main Street.” Gustavo sighed, “David, I do not know if you are stupid or naïve. Every September when you bet $1,000 that the perennially atrocious Toronto Maple Leafs will win the Stanley Cup, I assumed you were simply ingenuous. Your comments today have convinced me that you are an imbecile. Let me assure you that those will not be the findings that you present at the World Economic Forum. Rather you will inform the world that derivatives are a financial instrument that is being used by brilliant and prudent financial professionals to mitigate risk and make the world a safer place.”
The ‘Truth Will Out’: “Gustavo”, I groaned, “that would be a lie. I cannot in good conscience, sacrifice my integrity, my honor, my core beliefs and my good name simply to placate Wall Street and the Central Banks. I have a responsibility to my readers on Main Street to inform them, to warn them, to prepare them for the likely financial chaos that derivatives will cause”. “Gustavo”, I said with iron willed determination, “the Truth Will Out”. “David”, Gustavo snarled, “If you change the tenor of your presentation and indicate that derivatives are the most benign form of financial instrument, somewhat akin to Treasury bills, we will double your fee”.
Move along nothing to see here: Dear Reader, in summary let me say that derivatives are the most benign form of financial instrument, somewhat akin to treasury bills. Gustavo’s immutable logic and persuasive argument was instrumental in helping me reach the correct conclusion regarding the risks to the Global economy posed by derivatives. So Dear Reader, move along, there is nothing to see here.”
"Complexity Theory: the Avalanche and the Snowflake"
"Complexity Theory: the Avalanche and the Snowflake"
by James Rickards
"One of my favorites is what I call ‘the avalanche and the snowflake’. It’s a metaphor for the way the science actually works, but I should be clear: it’s not just a metaphor. The science, the mathematics and the dynamics are actually the same as those that exist in financial markets.
Imagine you’re on a mountainside. You can see a snowpack building up on the ridgeline while it continues snowing. You can tell just by looking at the scene that there’s danger of an avalanche. It’s windswept… it’s unstable… and if you’re an expert, you know it’s going to collapse and kill skiers and wipe out the village below. You see a snowflake fall from the sky onto the snowpack. It disturbs a few other snowflakes that lie there. Then, the snow starts to spread… then it starts to slide… then it gains momentum until, finally, it comes loose and the whole mountain comes down and buries the village.
Question: What do you blame? Do you blame the snowflake, or do you blame the unstable pack of snow? I say the snowflake’s irrelevant. If it wasn’t the one snowflake that caused the avalanche, it could have been the one before, or the one after, or the one tomorrow. The instability of the system as a whole was the problem. So when I think about the risks in the financial system, I don’t focus on the ‘snowflake’ that will cause problems. The trigger doesn’t matter.
A snowflake that falls harmlessly – the vast majority of all snowflakes - technically fails to start a chain reaction. Once a chain reaction begins, it expands exponentially, can ‘go critical’ (as in an atomic bomb) and release enough energy to destroy a city. However, most neutrons do not start nuclear chain reactions, just as most snowflakes do not start avalanches.
In the end, it’s not about the snowflakes or neutrons. It’s about the initial critical state conditions that allow the possibiity of a chain reaction or an avalanche. These can be hypothesized and observed at large scale, but the exact moment the chain reaction begins cannot be observed. That’s because it happens on a minute scale relative to the system. This is why some people refer to these snowflakes as ‘black swans’, because they are unexpected and come by surprise. But they’re actually not a surprise if you understand the system’s dynamics and can estimate the system scale.
It’s a metaphor, but really the mathematics behind it are the same. Financial markets today are huge, unstable mountains of snow waiting to collapse. You see it in the gross notional value of derivatives. There is $700 trillion worth of swaps. ($2.5 Quadrillion by other reputable estimates. - CP) These are derivatives off balance sheet, hidden liabilities in the banking system of the world. These numbers are not made up. Just go to the IS annual report and it’s right there in the footnote.
Well, how do you put $700 trillion into perspective? It’s ten times global GDP. Take all the goods and services in the entire world for an entire year. That’s about $70 trillion when you add it all up. Well, take ten times that, and that’s how big the snow pile is. And that’s the avalanche that’s waiting to come down."
"$2.5 Quadrillion Disaster Waiting to Happen"
"$2.5 Quadrillion Disaster Waiting to Happen –
Egon von Greyerz"
By Greg Hunter’s USAWatchdog.com
"There is sufficiency in the world
for Man's need but not for his greed."
- Mahatma Gandhi
"Egon von Greyerz (EvG) stores gold for clients at the biggest private gold vault in the world buried deep in the Swiss Alps. EvG is a financial and precious metals expert. EvG is a former Swiss banker and an expert in risk. He says the risk in the global markets has never been this high.
EvG explains, “Credit has increased dramatically through derivatives. All instruments being issued now by banks, pension funds, stock funds, it’s all synthetic. There is no real underlying payments in anything almost. Therefore, my estimate for derivatives would be at least $2 quadrillion, and I think that is probably conservative. Then, we have debt on top of that of $300 trillion, and we also have a couple hundred trillion dollars of unfunded liabilities. So, we are talking about $2.5 quadrillion, and that’s with a global GDP of $80 trillion. So, there is a disaster waiting to happen, and especially because all this created money has created no value whatsoever. I always knew this would collapse, and it’s taken longer than I expected, but I think we are at the end of a major era.
These derivatives, at some point soon, will actually turn into debt. Central banks will have to cover all the outstanding liabilities of the commercial banks as we are seeing now with Credit Suisse, Bank of England and etc. This is going to happen across the board. Whether it’s called derivatives or called debt, as far as I am concerned, it’s the same thing. It will have the same effect on the world financial system, which will be disastrous, of course.”
EvG says the derivative markets were simply a way for financial institutions to carry debt and not show it on their balance sheets. In the end, everything will balance out. EvG goes on to say, “Nobody can repay the debt, and they can’t even pay interest. So, therefore, when the debt implodes, so will the assets that were financed by this debt. So, both sides of the balance sheet have to come down. Whether it comes down by 50%, 75% or 90%, I don’t know. All I think about is risk, and the financial system will not survive in its present form. Central banks only use one kind of medicine, and that is more printed money. Now, you are getting negative returns on printed money. So, that is not going to save anything.
Sadly we are looking at a situation when this system will start to implode. The rich are still rich, but the poor are really poor. Overall in the UK, Germany and most European countries, people don’t have enough money to live. This is a human disaster already. With food costs going up 25% and energy going up the same and gasoline, interest rates and rents, people don’t have enough money, and that is happening now. It’s a human disaster of mega proportions. It’s so sad, and governments will have no chance of doing anything about it. The risk is increasing exponentially, and it is going to get worse.” There is much more in the 43-minute interview.
Join Greg Hunter on Rumble as he goes One-on-One with Egon von Greyerz of Matterhorn Asset Management, which can be found on GoldSwitzerland.com.
o
"A Stock Market Crash Like No Other Is Coming In May As Major Threats Pile On"
Full screen recommended.
Epic Economist, 5/6/24
"A Stock Market Crash Like No Other
Is Coming In May As Major Threats Pile On"
"Be skeptical of the U.S. stock market's recent rebound - there's more downside ahead, and plenty of evidence to back it up. The sound of alarm bells is becoming harder to ignore. With the economy slowing amid softening consumer activity, rising unemployment numbers, and spiking delinquency rates, big name stocks that have been propping up the market during latest rally are starting to lose momentum. Worse, they're already losing billions in market capitalization, and poised for an even bigger crash by mid-May, according to several renowned market strategists. JPMorgan says this is just the start of a much deeper sell-off that will put an end to this bull run. New data shows that the perfect setup for investor panic is here, and it's going to be ugly!
Over the past seven days, financial markets posted mixed results, especially after the Fed meeting on Wednesday. The U.S. stock market has finished the first quarter of 2024 on an astonishing tear, with the benchmark S&P 500 rising in 18 out of the 22 preceding 22 weeks. But that's no longer the case – the index has fallen over each of the past three.
After hinting that a rate cut would be near in March, the Federal Reserve signaled last week that investors shouldn't expect a reversal in policy any time soon, which led major indexes to report significant intraday losses. On Tuesday, members of the central bank’s policy committee voted unanimously to keep the crucial fed funds rate in its current range of 5.25% to 5.50%. Officials held the rate at its highest since 2001 to fight inflation that’s run too high for comfort in the first few months of 2024.
“In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective,” the Federal Open Market Committee said in a new statement, adding language that was absent from the statement the group made when it previously met in March."
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Musical Interlude: Peder B. Helland, "A Dream"
Full screen recommended.
Peder B. Helland, "A Dream"
"Beautiful Relaxing Music •
Norwegian Nature & Violin, Flute, Piano & Harp Music"
"A Look to the Deep Heavens"
Full screen recommended.
"The Hubble Ultra Deep Field in 3D"
o
A Universe of 2 Trillion Galaxies"
"In 2016, a study published in The Astrophysical Journal and led by Christopher Conselice of the University of Nottingham using 3D modeling of images collected over 20 years by the Hubble Space Telescope concluded that there are more than two trillion galaxies in the observable universe."
○
"In this galaxy, there's a mathematical probability of three billion Earth-type planets. And in all of the universe, 2 trillion galaxies like this. And in all of that... and perhaps more, only one of each of us."
- "Dr. Leonard McCoy"
"We Are Mortals All..."
"We are mortals all, human and nonhuman, bound in one fellowship of love and travail. No one escapes the fate of death. But we can, with caring, make our good-byes less tormented. If we broaden the circle of our compassion, life can be less cruel."
- Gary Kowalski
Chet Raymo, "The Meaning Of Life"
"The Meaning Of Life"
by Chet Raymo
"There is only one meaning of life, the act of living itself."
– Erich Fromm
"I had heard from a high-school student in the midwest who had read my book 'Skeptics and True Believers,' in which, as you may know, I take to task all forms of faith that lack an empirical basis, including astrology and supernaturalist religion. He writes: "Are we just meaningless beasts roaming a meaningless Earth with the sole purpose of popping out babies so we can raise them to live longer, more meaningless lives?"
A good question, the best question. What we have learned about our place on Earth does indeed suggest that we are beasts, related even in our DNA and molecular chemistry to other animals. And, yes, the driving purpose of all animal life would seem to be "popping out babies." But our uniquely complex human brains allow us to be more than beasts, more than baby-poppers. As far as we know, humans are the most complex thing in the universe, and in our desire to gain reliable knowledge of the universe the universe becomes conscious of itself.
As for myself, I don't need stars or gods to give my life meaning. I work at meaning every day, in the love of family and friends, in caring for my own little pieces of the Earth, in art, in science, and in making myself conscious of the mystery and beauty - and terror - of the cosmos.
"Or is there a possibility that there may be more?" asks my midwestern correspondent. Yes, there is almost certainly more to existence than what we have yet learned. Just think how much more we know than did our pre-scientific ancestors. But that still greater knowledge will have to wait for minds other than my own. My children and grandchildren will know far more than I, and in that growing human storehouse of reliable knowledge I hope they will find some greater measure of meaning.
In the meantime, I attend to the fox that sometimes walks across my windowsill, the morning glory seedlings that reach achingly for the sun, and the moon that hangs like a great milky eye in the sky. Francis Bacon said that what a man would like to be true, he preferentially believes. That's a mistake I try to avoid. I choose instead to believe what my senses tell me to be palpably true."
A good question, the best question. What we have learned about our place on Earth does indeed suggest that we are beasts, related even in our DNA and molecular chemistry to other animals. And, yes, the driving purpose of all animal life would seem to be "popping out babies." But our uniquely complex human brains allow us to be more than beasts, more than baby-poppers. As far as we know, humans are the most complex thing in the universe, and in our desire to gain reliable knowledge of the universe the universe becomes conscious of itself.
As for myself, I don't need stars or gods to give my life meaning. I work at meaning every day, in the love of family and friends, in caring for my own little pieces of the Earth, in art, in science, and in making myself conscious of the mystery and beauty - and terror - of the cosmos.
"Or is there a possibility that there may be more?" asks my midwestern correspondent. Yes, there is almost certainly more to existence than what we have yet learned. Just think how much more we know than did our pre-scientific ancestors. But that still greater knowledge will have to wait for minds other than my own. My children and grandchildren will know far more than I, and in that growing human storehouse of reliable knowledge I hope they will find some greater measure of meaning.
In the meantime, I attend to the fox that sometimes walks across my windowsill, the morning glory seedlings that reach achingly for the sun, and the moon that hangs like a great milky eye in the sky. Francis Bacon said that what a man would like to be true, he preferentially believes. That's a mistake I try to avoid. I choose instead to believe what my senses tell me to be palpably true."
“Life, Explained To You”
“Life, Explained To You”
Author Unknown
“On the first day God created the dog. God said, “Sit all day by the door of your house and bark at anyone who comes in or walks past. I will give you a life span of twenty years.” The dog said, “That’s too long to be barking. Give me ten years and I’ll give you back the other ten.” So God agreed.
On the second day God created the monkey. God said, “Entertain people, do monkey tricks and make them laugh. I’ll give you a twenty-year life span.” The monkey said, “Monkey tricks for twenty years? I don’t think so. Dog gave you back ten, so that’s what I’ll do too, okay?” And God agreed.
On the third day God created the cow. “You must go to the field with the farmer all day long and suffer under the sun, have calves, and give milk to support the farmer. I will give you a life span of sixty years.” The cow said, “That’s kind of a tough life you want me to live for sixty years. Let me have twenty and I’ll give back the other forty.” And God agreed again.
On the fourth day God created man. God said, “Eat, sleep, play, marry and enjoy your life. I’ll give you twenty years.” Man said, “What? Only twenty years? Tell you what, I’ll take my twenty, and the forty the cow gave back, and the ten the monkey gave back, and the ten the dog gave back, that makes eighty, okay?” “Okay,” said God, “You’ve got a deal.”
So that is why the first twenty years we eat, sleep, play, and enjoy ourselves; the next forty years we slave in the sun to support our family; the next ten years we do monkey tricks to entertain the grandchildren; and the last ten years we sit on the front porch and bark at everyone.”
“Life has now been explained to you.”
The Poet: David Whyte, "One Day"
"One Day"
"One day I will say
the gift I once had has been taken.
The place I have made for myself
belongs to another.
The words I have sung
are being sung by the ones
I would want.
Then I will be ready
for that voice
and the still silence in which it arrives.
And if my faith is good
then we'll meet again
on the road,
and we'll be thirsty,
and stop
and laugh
and drink together again
from the deep well of things as they are."
- David Whyte,
"Where Many Rivers Meet"
"The poem is a little myth of man's capacity of making life meaningful.
And in the end, the poem is not a thing we see -
it is, rather, a light by which we may see - and what we see is life."
- Robert Penn Warren
"I Hope I End Up..."
"I don't want to pass through life like a smooth plane ride. All you do is get to breathe and copulate and finally die. I don't want to go with the smooth skin and the calm brow. I hope I end up a blithering idiot cursing the sun - hallucinating, screaming, giving obscene and inane lectures on street corners and public parks. People will walk by and say, 'Look at that drooling idiot. What a basket case.' I will turn and say to them, It is you who are the basket case! For every moment you hated your job, cursed your wife and sold yourself to a dream that you didn't even conceive. For the times your soul screamed yes and you said no. For all of that. For your self-torture, I see the glowing eyes of the sun! The air talks to me! I am at all times! And maybe, the passers-by will drop a coin into my cup."
- Henry Rollins
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